Reviewing M Private Residences Non-Profit Structure

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Written by Nick Copley

Published: 06 April 2015

The Canadian destination club M Private Residences has been structured as a non-profit corporation since 2008. This means that it is not set up to generate profits for outside shareholders. This is the only destination club with this type of structure, so here's a walk through on what this means for the club shareholder members.

Financially

This non-profit structure keeps the costs of running M Private as low as possible. There is no profit built into the cost structure, either in the initial fee or the annual dues, and no outside shareholders looking for an annual management fee or dividend. In other words the annual dues simply pay for the running of the club. In some of the other equity destination clubs there is a separate management company that runs the club and there may be an additional fee of say 1% of the asset values, charged each year as a management fee.

When a new member buys into M Private over 90% of their initial membership payment goes into buying new real estate. This is a high percentage compared to some of the other equity based destination clubs.

M Private Residences has a "Sunset Provision" which means that starting in 2020 the club can start to sell off the residences and return the proceeds to members. Members will also have the option to stay in the club. Most of the other equity destination clubs also have a finite lifetime on their funds and plan to start selling their real estate after periods of 7 to 12 years. For M Private, when the assets are liquidated, 100% of the proceeds will go to members. Again there is no management 'cut' or share, whereas in the other equity destination clubs the management takes a 10% to 20% share of the profit after the members have received back their initial investment.

Note, this 80:20 split of profits on sale, is typical of venture capital and private equity funds. In the private equity world the 20% is referred to as the "carried interest" that the general partners receive as their own income – it's a large part of their incentive for managing the company over the lifetime of a fund.

Board and Management Structure

The Board of Directors for M Private is made up of nine elected members all of whom are shareholder members. The board maintains complete oversight of the operating and capital plans of the club, as well as real estate purchase decisions and audit review. On a day to day basis the club is run by General Manager John Beckel and a small team.

This is the only destination club that I'm aware of that has this non-profit structure.